Jan. 14 (Bloomberg) -- Bristol-Myers Squibb Co. increased
its bid for Inhibitex Inc. and its experimental hepatitis C drug
twice in five days, raising its offer 30 percent to top an
unnamed competitor, according to a filing.

The courtship of Inhibitex began last October, with New
York-based Bristol-Myers seeking to purchase Alpharetta,
Georgia-based Inhibitex’s experimental drug for $550 million,
according to a filing with the U.S. Securities and Exchange
Commission. Four months later, on Jan. 7, it had become a $2.5
billion agreement to buy Inhibitex for $26 a share.

The purchase was the second major acquisition of a company
for its hepatitis C assets in the past three months. Drugmakers
are seeking to enter a developing $20 billion market for
hepatitis C medicines that are easier to use and more effective
than existing therapies.

Bristol-Myers Chief Executive Officer Lamberto Andreotti
was at the head of the negotiations for Inhibitex, going back
and forth with an Inhibitex board member as the price went up,
according to yesterday’s regulatory filing.

“We did not have a nuke, and we wanted a nuke,” Andreotti
said at the J.P. Morgan Healthcare Conference in San Francisco,
three days after the deal was announced.

The Inhibitex experimental drug, INX-189, is a nucleotide
polymerase inhibitor, or “nuke,” a pill that stops the
hepatitis C virus from replicating. “It is the high unmet
medical need in hepatitis C that has made us pursue very
seriously the acquisition of Inhibitex,” he said.

Patient Population

As many as 170 million people worldwide carry the virus, a
bloodborne disease that can lead to liver cirrhosis and cancer,
according to the Centers for Disease Control and Prevention in
Atlanta.

Gilead Sciences Inc. purchased Pharmasset, the maker of an
experimental hepatitis C drug, for $10.8 billion in a deal
announced Nov. 21. The price was 94 percent higher than
Pharmasset’s 20-day trading average. The 126 percent premium
paid by Bristol-Myers over Inhibitex’s average price in the 20
days before the deal ranks as the second-largest on record for a
biotechnology or pharmaceutical company worth more than $500
million, according to data compiled by Bloomberg since 1999.

Idenix Pharmaceuticals Inc. and Achillion Pharmaceuticals
Inc. are also testing medicines against the virus. Shares of
both companies have risen since the Bristol-Myers deal. Idenix
has more than doubled in value, closing yesterday at $14.42.
Achillion shares have increased 56 percent during the period to
$12.37.

First Meeting

The Bristol-Myers deal was at least four months in the
making, according to yesterday’s filing. It started at
Inhibitex’s Georgia headquarters, with a two-day meeting between
three Bristol-Myers executives and Russell Plumb, Inhibitex’s
CEO. Two weeks later, after a phone call on Nov. 3 from Bristol-Myers, Plumb had a $550 million offer for INX-189.

On Nov. 4, though, Inhibitex released data from a study
that showed the drug “did well in reducing HCV in patients, and
was well tolerated, with no serious side effects.” The study
results more than doubled Inhibitex’s shares to $8.54.

Over the next month, what started as a look at INX-189
became a broader examination of all of Inibitex. Bristol-Myers
examined the company’s “other pipeline assets, its technology
platform, and information regarding its discovery, and research
and development capabilities” and was given access to
“confidential non-public information related to its business
and operations,” according to the regulatory filing.

Competitor Emerges

On Dec. 5, Bristol-Myers Chief Financial Officer Charles
Bancroft got a phone call from Credit Suisse Group AG,
Inhibitex’s bankers. Bancroft was told Inhibitex had an offer
from another company to buy it outright and Bristol-Myers could
make an offer, as well. The competitor wasn’t identified in the
filing.

Bristol-Myers’s board took only a day to decide that an
acquisition of Inhibitex was worth exploring, and four days
before Christmas told Plumb they intended to make an offer. It
came on Jan. 3, at $20 per share, almost double Inhibitex’s
stock price of $10.11 that day.

Less than 24 hours later, Inhibitex’s bankers from Credit
Suisse were back in touch, telling Bristol-Myers and their
bankers at Citigroup Inc. that the rival also had bid $20.
Bristol-Myers was given until 6 p.m. the next day to propose
their “best and final” offer.

Raising the Bid

Andreotti decided to increase the offer to $23.50 in cash.
He also reached out to Gabriele Cerrone, a board member of
Inhibitex, e-mailing and calling him to work out the details.

It wasn’t enough, yet. The other bidder matched Bristol-Myers’s offer, the drugmaker’s lawyers were told.

The Bristol-Myers board met Jan. 6. They voted to raise the
bid to $26, and Andreotti called Cerrone to say the offer was
the best they would get. Inhibitex was given until 2 p.m. the
next day -- a Saturday -- to take the deal. If they didn’t,
Bristol-Myers would pull back its offer, and “actively pursue
the transaction” at $23.50.

The news of the deal was released in a statement at 9:13
p.m. Jan. 7. “This acquisition represents an important
investment in the long-term growth of the company,” Andreotti
said in announcing the purchase.